Regulations for Investors When Conducting Margin Trading on the Stock Market

Investors engaging in margin transactions must comply with the regulations in the Draft Circular guiding transactions on the stock market as follows:

Regulations for Investors engaging in margin transactions on the stock market (illustrative photo)

- Foreign investors are not allowed to engage in margin transactions.- Before engaging in margin transactions, an investor must sign a margin transaction contract with a securities company providing services for customers to borrow money for stock purchases, advance money from stock sales.

- The margin transaction contract concurrently serves as the loan agreement for loans on the margin transaction account. The margin transaction contract must include, at a minimum, details on margin assets, the deadline for margin top-up, handling of margin assets if the investor fails to top up, methods of dispute resolution, clarification of possible risks, damages that may arise, and customer payment costs.

- At each securities company where an investor opens a securities transaction account, the investor is allowed to open only one (01) margin transaction account.

- The margin transaction account is a separate account or is separately managed or accounted for as a sub-account of the investor's existing securities transaction account. The securities company must separately account for the margin transaction account with the normal securities transaction account of each investor and separate the margin transaction account and the normal securities transaction account among different investors.

- Investors are obliged to ensure the initial margin ratio and the maintenance margin ratio as per the contract signed with the securities company. When the margin ratio on the investor's margin transaction account falls below the maintenance margin ratio, the securities company will issue a margin call for additional collateral. Securities that are not allowed for margin transactions will not be counted as collateral assets when determining the initial margin ratio and maintenance margin ratio for margin transactions.- In case the investor does not comply, the securities company has the right to sell the pledged securities according to the terms in the margin account opening contract. Before selling the pledged securities, the securities company must disclose information per the legal regulations on information disclosure in the stock market and notify the investor with a statement of the result of the pledged securities sale to fulfill the reporting obligations on ownership and transaction information disclosure according to relevant legal regulations (if any).

See details in the Draft Circular guiding transactions on the stock market.

Long Binh

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